Causes of The Deficit: Republicans Acting Responsibly

I am fortunate enough to have Ron Johnson, R-WI, as my US Senator. He is one of the freshman class aligned with the Tea Party movement. I have been tweeting Senator Johnson suggesting that he seriously consider raising the US Debt Ceiling. My basic argument is that the current deficit was causally related to actions taken during the Bush II administration. Being a Republican, Senator Johnson should be willing to take responsibility for these actions.

In the event that Senator Johnson would be interested in a more detailed explication of my causal argument, I've provided the following path diagram (click to enlarge) developed from Chapter 10 of the book This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff.

Reinhart and Rogoff's own explanation is pretty straight forward (p. 172-173):

When a country experiences an adverse shock--due, say, to a sudden drop in productivity, war, or political or social upheaval--naturally banks suffer. The rate of loan default goes up dramatically. Banks become vulnerable to large losses of confidence and withdrawals, and the rates of bank failure rise. Bank failures, in turn, lead to a decrease in credit creation. Healthy banks cannot easily cover the loan portfolios of failed banks, because lending, especially, to small and medium-sized businesses, often involves specialized knowledge and relationships. Bank failures and loan pullbacks, in turn, deepen the recession, causing more loan defaults and bank failures, and so on.

Earlier in Chapter 10, Reinhart and Rogoff explain that recessions, bailouts and foreign wars (Iran, Afghanistan and the War on Terror) all lead to increases in the deficit. All these causes of increasing US debt are the direct result of actions taken during the Bush II administration, to include the lax attitude toward regulation of the financial sector that led to the Subprime mortgage crisis itself (the shock in the path diagram).

Notably missing from this causal explanation are entitlement programs, Obama care, public sector unions, high taxes (taxes were cut during the Bush II administration) and other right wing fixations. Senator Johnson will certainly see the sense of my air-tight causal argument. The rational policy response, which he will also certainly appreciate, would be to end foreign wars and the war on terror in addition to increased regulation of the financial sector. And, since the wealthy do not seem to know how to spend tax reductions on anything other than speculation, a tax increase on ill-gotten gains would also help reduce the deficit.

Technical Note: The upper part of the path diagram above is a positive feedback loop (negative signs multiplied together become positive as in basic algebra). The positive feedback effect explains why financial crises last so long and are so resistant to policy interventions.

Stack and Tilt: The Driver

From comments I've read on the Internet, golfers who have tried Stack and Tilt (S&T) seem to have trouble with the driver. That's not surprising. S&T emphasizes hitting down on the ball (hitting the ball first and then taking a divot). It's hard to see how that "fundamental" translates to the driver where the ball is hit off a tee.

This problem is really nothing special to S&T (no credible golf instruction recommends hitting the ground then hitting the ball). Regardless of instruction method, some adjustments have to be made when hitting the driver. The video above does a good job of explaining the adjustments to the S&T swing (you can also see tour player Charlie Wi hit a driver here).

The graphic below is taken from the S&T Book (page 40):

I had some difficulty with the driver when making the transition from the Width Swing (Laws of Golf) to S&T. During the transition, I was always pushing my drives. This was the result of a few problems: not enough weight on my left foot, not pushing my left knee out enough on the backswing and too flat a shoulder turn (not standing up enough on the backswing and not getting my left shoulder down enough on the backswing).

You can hit a perfectly adequate drive with the Width swing and a flat shoulder turn. Since the ball is up on a tee, a flat shoulder turn and a bit of a sway back on your right foot (like a baseball player getting ready to hit a home run) can be very effective. For the Width swing, the "adjustments" have to be made with the irons to hit down on the ball with a flat shoulder turn. After the transition to S&T, however, I'm a more accurate and consistent driver and have not really lost any distance. And, my iron play (where S&T seems to make a lot of sense for everyone) is a lot sharper. So, if you are making the transition to S&T, it's worth studying the video above, understanding that adjustments have to be made, and spending a little time at the driving range.

2011 WSGA State Amateur Championship

The 2011 Wisconsin State Golf Association (WSGA) Amateur Championship was held last week and the winner was Mike McDonald (interviewed above) with a one-over par 285 for the four rounds. It was a test of power vs. strategy (which you can read about here and here). In the end, strategy won.

I followed the leaders in the fourth round. The first hole at Maple Bluff Country Club, a 290 yard par 4, pretty much set the stage for the entire day. Mike McDonald teed off with a 7 iron. The two leaders from the third round, Chris Meyer and Jack Schultz, both drove the green, Meyer with a driver and Schultz with a three wood (Meyer was actually slightly over the green with his drive).

While Meyer and Schultz attempted to over power the course (Maple Bluff is an old, tree-lined, beautifully maintained 6400 yd layout supposedly too short for championship golf), McDonald played the course the way it was intended to be played. Both Meyer and Schultz had double bogeys in their final rounds; McDonald had none. Par golf turned out to be good enough.

Here is a video of Chris Meyer on the 186 yd. 4th hole:

And, a video of Jack Schultz on the same hole:

They both have great, powerful golf swings (each is hitting an eight iron). Their games were just not suited to this particular golf course.

Mark Bemowski at the 2011 WSGA

The 2011 Wisconsin State Amateur Championship was played last week at the Maple Bluff Country Club in Madison, WI. It was won by Mike McDonald with a one over par round of 285 and it was a very interesting final day you can read about here and here. As interesting as was the final round (maybe I'll comment on it in a future post), the triumph of strategy over power was not the real story for me.

Earlier in the morning of the final day I followed the 8:50 tee time for 18 holes with Randy Zikeli and Mark Bemowski. They were well out of the competition and I was the only one following them.

My reason for following this pairing was that I had played high school golf against Mark Bemowski. In high school, it was a little frustrating to be so seriously outclassed by a player my age. Today, I look back at it as a great privilege.

Here's Mark's major accomplishments as listed in his recent Senior National Amateur Hall of Fame induction announcement (here):

• Wisconsin State Open Champion in 1974.
• Wisconsin State Amateur Champion in 1976, 1981, 1984, 1997, 1999 and 2005
• United State Senior Amateur Champion in 2004
• United States Senior Amateur Runner-Up in 2002 and 2005
• United States Senior Amateur Semi-Finalist in 2009
• Wisconsin State Senior Amateur Champion in 2005 and 2010.
• Wisconsin State Senior Open Champion in 2010.

He was inducted into the WSGA Hall of Fame in 1999 (here).

Mark finished the WSGA in a tie for 27th at +13 with 78/71/77/71. Had his first and third rounds been the same as is second and fourth, he would have won the tournament.

Attending a State Amateur Championship is the best free golf you will ever see, and you can banter with the contestants (Mark's first question for me was "You must have nothing better to do today if you're out here following us!"). I followed a few other players and they all seemed happy to have an appreciative gallery!

Rewriting History

Over the last decade, there has been a concerted effort to rewrite the history of the Great Depression (here, here, and here). Historian Robert McElvaine (here) and economist Paul Krugman (here) have both attempted to challenge the revisionists.

Basically, the revisionists have argued that the policies of the New Deal were either ineffective or actually caused the Great Depression. Revisionists point to the 1937 Recession as proof of their assertions.

The challengers argue that the 1937 Recession was caused precisely by contractionary spending policies the Roosevelt administration mistakenly pursued after Roosevelt's 1936 re-election. They argue that, like the Obama administration during the late-2000s Great Recession, the Roosevelt administration failed to stimulate the economy enough until the spending spigot was opened during World War II.

After reading both side of the debate, it still seems an open question whether anything short of putting the entire economy on a war footing (that is, conventional deficit spending, tax cuts, monetary manipulations, etc.) would be an effective policy response. Part of the problem is defining what a "return to normalcy" would actually mean when the period before the collapse was being driven by an economic bubble.

One definition would be a return to full employment but "normal" employment was itself distorted by the bubble: people who would normally not be in the labor market were drawn in during the bubble and people were pushed out who should not have been as a result of the crash.

I don't think we really appreciate the distortionary effects of bubbles and the importance of preventing bubbles from expanding in the first place.

Paul Ryan Gangs Up on the Gang of Six

GANG OF SIX "Bipartisan Plan to Reduce Our Nation's Deficits" (5-page PDF, via Kaiser Health News) http://bit.ly/qTPrxS ... Paul Ryan: "Problems, Questions and the Potential for Promising Reforms" http://1.usa.gov/quVArL

A Better Lawn Seed?

Looking for a better lawn, less watering, less mowing, no fertilizer, reduced ecological footprint? Pearl's Premium Grass Seed (available at Home Depot) claims to meet all those requirements. Instructions for over-seeding you current lawn are available here. It's a little more expensive than conventional grass seed but, if the claims are accurate, the total cost of ownership will be much lower.

Darren Clarke: Prototype Width Player

In honor of Darren Clarke's win today in the British Open (here), here's some quick swing analysis. From his physique alone (Endomorphic body type), Darren Clarke would be considered the prototypical width player in the LAWs of Golf typology (Leverage, Arc, Width swing types). In the video above (which, unfortunately, is not directly face on), you can see most of the features summarized here. Even though Darren's physique has changed over the years, his swing has (to me) looked fairly consistent and was certainly quite effective this weekend.

One point I want to highlight from the video is Darren's position at the top. This is one problem I had learning the width swing given the verbal descriptions in the LAWs book. The written description talks about "pushing back into the width dimension". The push-set concept created, for me, too flat a swing plane. If you will notice Darren at the top, you can draw a fairly straight line along his left arm directly toward the ball. As the arrow at the top of the line implies, the push-set happens at this point and Darren doesn't really exaggerate the move (his left elbow is still bent).

What is important for me is to have this image of my left arm pointed at the ball when I'm fully turned 90 degrees at the top of my back swing. This gives me the distinct feeling of hitting down on the ball even with the driver (although notice how far forward Darren tees the ball with the driver allowing him to catch the ball fairly level or even a little on the upswing to control ball height which he did very well in the Open). And, hitting down on the ball is considered the "one-and-only" fundamental emphasized by the Stack and Tilt Swing.

The video above is from a golf clinic put on by Darren Clarke and Lee Westwood. They both comment on a number of topics regarding their golf swings.

One other comment that could be made regards Darren Clarke's level of fitness. Even though he jokes about "playing better when he's fat" he does have a fairly intense workout program you can read about on his website (here).

Padraig Harrington: Keep the Sternum Moving Forward When Chipping

I caught Padraig Harrington giving a chipping lesson on the Golf Channel on Sunday. Basically, he recommended keeping the sternum moving forward, in front of the ball to create lots of backspin when chipping around the green. I tried it today and it works very effectively on all types of chip shots. It's the same movement recommended on the Stack & Tilt video.

To this I would only add that to get more backspin (1) open your stance, (2) open the club face so that it remains pointing at your target and (3) swing along your toe line (from outside to inside rather than toward the target).

Is It Time To Listen to Paul Ryan?

Paul Krugman, in a New York Times OP-ED piece (here) goes through the five excuses most commonly given for doing nothing as the US economy continues to perform poorly. And. in another blog post (here), Krugman points out that the academic research on the supposed "expansionary" effects of austerity is based on a "statistical illusion".

Of course, austerity is what Wisconsin's favorite son has been preaching since he assumed leadership of the House Budget Committee. Here is Krugman's smack down of arguably one of the world's all-time great conservative philosophers (Krugman actually implies that conservative philosophy might be delusional):

Excuse No. 2: Fear the bond market.

Two years ago The Wall Street Journal declared that interest rates on United States debt would soon soar unless Washington stopped trying to fight the economic slump. Ever since, warnings about the imminent attack of the “bond vigilantes” have been used to attack any spending on job creation.

But basic economics said that rates would stay low as long as the economy was depressed — and basic economics was right. The interest rate on 10-year bonds was 3.7 percent when The Wall Street Journal issued that warning; at the end of last week it was 3.03 percent.

How have the usual suspects responded? By inventing their own reality. Last week, Representative Paul Ryan, the man behind the G.O.P. plan to dismantle Medicare, declared that we must slash government spending to “take pressure off the interest rates” — the same pressure, I suppose, that has pushed those rates to near-record lows.

Just Walk Away

BEHIND THE CURTAIN - Email from a top Democratic aide, re last night's White House meeting: "First off, a number of folks in the room were struck by the fact that Cantor did virtually all of the talking for House Republicans, while Boehner basically just sat there. Second, Reid expressed frustration that every time we try to do something big on the deficit, Republicans walk away from the table. He cited the fiscal commission (when the 7 Republican cosponsors voted against the commission's findings), Coburn walking away from the Gang of 6, Cantor walking away from the Biden talks, and now Boehner walking away from the big deal in the latest round. Differences over substance aside, his point was about process - we're never going to get anything big done for the country if Republicans keep walking away from the table every time talks get serious."

--Another top Dem. aide emails: "To date, Congressional Republicans have voted no on the Simpson-Bowles commission, pulled out of the Gang of Six, abandoned the Biden-led talks, and rejected the President's 'grand bargain'-style offer. The more they keep rejecting compromises for averting a default, the more likely the public is to hold them accountable for the consequences."

--From the White House pooler, WashPost's Scott Wilson: "Pool escorted into Cabinet Room at 6:10pm. POTUS at center, flanked by Sen Reid and Speaker Boehner. Clearly a 'no ties' memo went out; all had open collar shirts and blazers. Sen McConnell had a canary yellow polo-style shirt on, Rep Cantor sported plaid. Pool only allowed to stay in for seconds, literally. A pool member shouted, 'Mr. President, can you get a deal done in 10 days?' POTUS responded, 'We need to.' ... Meeting has ended (at roughly 7:30pm). Aides estimate it lasted approximately 75 minutes."

--Carrie Budoff Brown and David Rogers: "The president argued several times that negotiators should work toward a $4 trillion package for reducing the deficit rather than the smaller one favored by Republicans, calling on them to stand up to their base to get it done. He said both parties would suffer politically, but they need to do something substantial, said a third Democratic official familiar with the meeting. 'If not now, when?' the president said to the group." http://bit.ly/pIN0mz

Dealing With Your Critics

Jean Cocteau died of a heart attack in 1963, at age 74, within hours of learning of the death of his close friend Edith Piaf. His epitaph reads, "I stay among you." "Listen carefully to first criticisms made of your work," he advised writers and artists. "Note just what it is about your work that critics don't like — then cultivate it. That's the only part of your work that's individual and worth keeping.

Rep. Ryan Gets a Sobering Lesson From the Netherlands

Rep. Paul Ryan, R-WI, is a conservative philosopher of the first rank. He doesn't really have to pay attention to anything that happens in the Netherlands when deducing policy recommendations from the postulates of privatization (the Netherlands, really, they smoke pot legally in coffee shops).

Unfortunately, whether it's from smoking too much weed or drinking too much neoconservative Kool-Aid, the Dutch decided to take Mr. Ryan's advice and privatize their mixed health insurance system in 2006. The rationale was that competition would reduce health care spending, enhance consumer choice and improve quality of care. In 2011, the Dutch now know that privatization was a failure.

A recent study in the New England Journal of Medicine (here) found that (1) competition has not slowed the growth of health care spending (national health expenditure is increasing faster than the rate of inflation and total costs of health insurance have increased 40% due to increases in administrative costs), (2) the number of uninsured have increased as have the number of "defaulters"--people who haven't payed their mandatory health insurance premiums for more than 6 months, (3) competition has not provided more choice (four insurance conglomerates control 90% of the insurance market, only about 4% of people change plans and 65% are dissatisfied with their coverage), and (4) the Netherlands still relies heavily on regulation (the government must still enforce global budgets, price controls and patient cost sharing).

Quoting from the study:

The myth that competition has been key to cost containment in the Netherlands has obscured a crucial reality. Health care systems in Europe, Canada, Japan, and beyond, all of which spend much less than the United States on medical services, rely on regulation of prices, coordinated payment, budgets, and in some cases limits on selected expensive medical technologies, to contain health care spending. Systemwide regulation of spending, rather than competition among insurers, is the key to controlling health care costs.

What the authors of the study don't acknowledge is that scientific data has nothing to do with policy deductions made from philosophical first principles.

To Serve Man

Yesterday and today, the SyFy channel is running a Twilight Zone marathon. One episode we saw last night (To Serve Man in the clip above) involves an Alien invasion, the inept U.S. military, an arrogant scientist (Lloyd Bochner) and his bombshell assistant (Susan Cummings). The Aliens (Richard Kiel) at first appear altruistically motivated. They leave a book written in their language that is eventually decoded by the bombshell assistant. She first gets the title "To Serve Man" and then figures out what the rest of the book is about to create the surprise ending.

This is all pretty much fun and is considered one of the best Twilight Zone episodes. More information about the Twilight Zone and its creator, Rod Serling, are worth a quick read.

Frankly, Barney, It's Hard to Believe Any Politician

Tonight, the PBS News Hour (here) aired a review of the Book Reckless Endangerment by Joushua Rosner and Gretchen Morgenson (see Robert Reich's review here). In the clip above, Barney Frank (D-NY) responds to some of the criticisms leveled at him by the book.

I've already commented on Fannie and Freddie's role on the Subprime Mortgage Crisis (here) and I guess I agree with Paul Krugman's early assessment (here). Fannie and Freddie are a convenient target that deflects criticism from the private sector, so this debate will continue as a very aggressive, concerted attempt to rewrite history.

Well-known economist Joseph Stiglitz also comes in for criticism in the book (here) and from the right wing (here) for an early study he did of Fannie and Freddie (here). Stiglitz has recently changed his opinion of Fannie and Freddie (here). All of this is fascinating reading!